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The American Medical Association, the American Hospital Association, and some physicians and hospitals have filed suit in the United States District Court for the District of Columbia challenging the rules governing the out-of-payment rates to be paid to providers under the No Surprises Act (“the Act”). The rules effectively set the rates at a health plan’s median contracted rate, which the lawsuit alleges is inconsistent with the unambiguous language of the Act, and, therefore, exceeds the government departments’ authority. In addition, the Plaintiffs moved the Court to stay the rules or to grant them summary judgment.

The Act was intended to ensure that patients pay no more than their in-network cost-sharing amounts for emergency services received in a nonparticipating hospital’s emergency department or a nonparticipating freestanding emergency facility and when they receive non-emergency services from a nonparticipating provider at a participating facility – goals that the AMA and AHA support.

The Act did not set a benchmark for the amount that health plans are required to pay the nonparticipating providers for the care provided to their members in these situations. Instead, the Act established an Independent Dispute Resolution (“IDR”) process to be used when there is no applicable state law or all payer database.

The Act mandated that the IDR entity “shall consider” several factors when determining the appropriate out-of-network rate:

  • The “Qualifying Payment Amount,” defined as the plan’s median contracted rate for that insurance market and that geographic area;
  • The level of training, experience, and quality and outcomes measurements of the provider or facility;
  • The market share of the nonparticipating provider or facility or that of the health plan in the geographic area;
  • The acuity of the patient and the complexity of the treatment;
  • The teaching status, case mix, and scope of services of the nonparticipating facility;
  • Demonstration of good faith efforts (or lack thereof) made by the nonparticipating provider or facility or the health plan to enter into network contracts.

The problem with the challenged rules is that they made only one of these factors, the Qualifying Payment Amount (the median contracted rate), the presumed appropriate out-of-network payment rate. The rules dictate that the independent dispute resolution entity “must presume that the QPA is [the] appropriate….out-of-network rate.” The rules permit the IDR entity to

consider the other factors listed in the Act only if there is a clear demonstration based on credible evidence that the QPA is “materially different” from the appropriate out-of-network rate – a standard that will be difficult, if not impossible, for providers to meet. In short, the rules effectively wrote all of the factors other than the median contracted rate out of the Act.

The complaint alleges that the rules do not reflect Congressional intent. In support, the lawsuit quotes from letters from members of Congress from both parties, including a letter from 150 members stating that the rules for determining the out-of-network payment rates “do not reflect the way the law was written, do not reflect a policy that could have passed Congress, and do not create a balanced process to settle payment disputes.”

The complaint also alleges that the rules will hurt patients, stating: “Because insurers can now rely on the IDR process for an unfairly low rate, they will have little incentive to include providers with higher costs (and frequently higher quality and specialized services) in their network, all to the detriment of patients.” The lawsuit cites to a specific example where Blue Cross and Blue Shield of North Carolina has already threatened to terminate network participation agreements with anesthesiologists who refuse to agree to lower rates in light of the rules.

The lawsuit asks the Court to find that the provisions in the rules setting the median contracted rate as the presumptive rate is inconsistent with the Act and exceeds the Defendants’ statutory authority, that the Court vacate the challenged rules, and enjoin the government departments from enforcing them.

In a statement announcing the lawsuit, the AHA’s President and CEO Rick Pollack stated: “No patient should fear receiving a surprise medical bill. That is why hospitals and health systems supported the No Surprises Act to protect patients and keep them out of the middle of disputes between providers and insurers. Congress carefully crafted the law with a balanced patient-friendly approach and it should be implemented as intended.”

Similarly, AMA President Gerald E. Harmon, M.D., stated: “[I]f regulators don’t follow the letter of the laws, patent access to care could be jeopardized as ongoing health plan manipulation creates an unsustainable situation for physicians. Our legal challenge urges regulators to ensure that there is a fair and meaningful process to resolve disputes between health care providers and insurance companies.”

The AMA and AHA’s lawsuit follows a lawsuit filed by the Texas Medical Association challenging the same rules, filed in the District Court for the Eastern District of Texas, Tyler Division.

The attorneys at Whatley Kallas, LLP will continue to follow developments in these lawsuits.

The AMA and AHA’s Complaint is linked here. The Motion for a Stay is linked here.